The Effects of Interest Rates and Taxes on New Car Prices
Maura P. Doyle 1997-38

Abstract:&nbspUtilizing the Consumer Expenditure Survey and state-level variation in
taxes, this study finds that prices for most models of new cars shift
by more than the amount of a sales tax. The evidence of an
overshifting of prices offers support for the recent models of tax
incidence in imperfectly competitive markets. The results also
suggest that changes in the after-tax interest rate have offsetting
effects on new car prices; a one percentage point increase in the
after-tax real interest rate will prompt, on average, a mark-down of
$106.